Fortunately, Donald Trump’s administration recently announced a partial delay in implementing these tariffs. Every day they booster about conducting “90 deals in 90 days” to transform trade relations. Trump is very much continuing the precedent of communicating directly with U.S. trading partners. He’s bringing back the term “Liberation Day,” a phrase that illustrates his administration’s protectionist trade policies.
Originally, the first deadline for these transactions was July 9. It has been extended since then, most recently to August 1, with signals that more extensions are possible. This strategic pause provides some time for these necessary, detailed negotiations to produce potential agreements, as U.S.-China tensions threaten to upend the current global trade landscape.
By Trump’s hand, the United States is indeed building its own tariff wall. This significant protective measure could unfortunately prove to be the catalyst needed for other nations to deepen their own trading connections. In that period, U.S. exports to the UK increased 7.4%. By comparison, sales to the ten members of the ASEAN alliance rose 12.2%, while trade with Africa exploded by a dazzling 18.9%.
In fact, this year the dollar has depreciated by 10% against other major currencies. This decline is a new and troubling variable in the trade landscape. Trump’s trade war has set the tariff rate at an effective average of about 15%. That’s up from the long-term average of only 2% to 4%.
The first letters sent to our trading partners, especially Japan and South Korea, indicate a new truculence in the negotiation process. Budget Japan’s Finance Minister Taro Aso has proposed using Japan’s enormous stash of U.S. government debt as leverage in negotiations. This strategy should be an invaluable bargaining chip in their conversations.
China has been making moves to respond to its trade pressure. Additional challenges aside, the country has seen a 6% increase in shipments to overseas markets despite a 9.7% decline in exports to the United States this year. This targeted change serves to underscore the broader impact of Trump’s tariff policies in creating new global trading patterns.
Scott Bessent, now Treasury Secretary, was firm. This is where we want to focus our attention, on these 18 countries. These countries have 95% of America’s trade deficit. He pointed out that this possible increase in the value of the dollar would counteract any inflationary pressure caused by the tariffs themselves.
The revenues from these tariffs are already having a significant effect on U.S. Treasury receipts. In reality, we just experienced record-breaking collections in May! Nonetheless, the administration is in the black financially—with no major trade agreement signed or even completed thus far. Analysts are already cautioning that so few deals will actually materialize before the looming September deadline.
“Liberation Day” – White House announcement
In the past, many market analysts have doubted that the administration will be able to achieve its very ambitious goal. One analyst humorously remarked on Trump’s tendency to retreat from tough negotiations, coining the phrase, “TACO, that Trump Always Chickens Out.”